JOYY Inc. (JOYY) 2026 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to JOYY Inc.'s second-quarter 2026 earnings call. (Operator Instructions)

I'd now like to hand the conference over to your host today, [Xinyuan Liu], the company's Head of Investor Relations. Please go ahead, Xinyuan.

Thank you, operator. Hello, everyone. Welcome to JOYY's second quarter 2026 earnings conference call. Joining us today are Ms. Ting Li, Chairperson and CEO of JOYY; and Mr. Alex Liu, Vice President of Finance. For today's call, management will provide a review of this quarter, followed by a Q&A session. The financial results and webcast of this conference call are available on our IR website, ir.joyy.com.

Please note that today's call contains forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report on Form 20-F and other documents filed with the SEC.

Please also note that JOYY's earnings press release and this conference call include disclosures of GAAP and non-GAAP financial measures. A reconciliation of these non-GAAP measures to GAAP measures is included in today's earnings press release. All figures referenced on today's call are in US dollars, unless otherwise noted.

I will now turn the call over to our Chairperson and CEO, Ms. Ting Li. Please go ahead.

(interpreted) Hello, everyone. I'm Li Ting. Thank you for joining us. Building on a strong first quarter, we delivered another solid result in Q2, recording accelerated revenue growth and notably improvement in operating profit. Our Social Entertainment, BIGO Ads and Shopline business all advanced in tandem, while our globally diversified ecosystem continued to unlock growth momentum, propelling our long-term value to its next level.

In the second quarter, we generated total revenue of $591 million, up 16.3% year on year and 6.3% QoQ. Social Entertainment revenue was $423 million, up 7.4% year on year and 5.6% QoQ. BIGO Ads, including both first-party and third-party businesses generated $134 million in revenue, up 33.1% year on year. With our third party, BIGO Audience Network sustained strong growth of 74.1% year on year.

Shopline revenue reached $34 million with year-on-year growth further accelerating to 28.6%. Non-live streaming revenue surpassed 31.8% of total revenue for the quarter. Non-GAAP operating profit reached $49 million, up 28.2% year on year and non-GAAP EBITDA reached $57 million, up 18.1% year over year.

Operating cash flow for the quarter was $65 million as of (technical difficulty) 2026, we held $3.06 billion in net cash. Since the start of this year, we have accelerated our capital returns. Year to date, through August 21, 2026, we repurchased accumulative $216 million in shares and paid $142 million in debt for total return of $359 million in shareholders. Meaningful shareholders' returns remain a key part of our strategy as we continue to execute on the $1.5 billion shareholders return program running through the end of 2028, which our Board [authorized] this May.

At this midyear mark, I would like to take a few minutes to share our perspective on our overall strategy.

Today, JOYY is steadily evolving into a multi-engine global technology company. In the first half of this year, the core Social Entertainment business maintained a steady recovery with all flagship products returning to solid growth and profitability continuing to improve.

This further validates the effectiveness of the judgments we have made to our content ecosystem, user experience and localized operations over the past several quarters. At the same time, our second growth curve comprising ad tech and smart commerce stained a strong performance, making an increasingly greater contribution to the group.

Looking ahead, we remain committed to building a global technology ecosystem driven by AI. By leveraging the synergies of Social Entertainment, programmatics, advertising and omnichannel e-commerce, we are fueling our growth flywheel and building the core competitiveness that will define our future.

First, Social Entertainment remains an important strategic cornerstone for the group. We will continue to strengthen the growth momentum and profitability of our core products while accelerating the build-out of our social product portfolio. These initiatives are expected to further reinforce the recovery trend and growth resilience of our core business, providing a stable foundation for profitability, cash flow generation.

At the same time, we are cultivating our ad tech and smart commerce businesses to boost the overall revenue expansion. We will prioritize enhancing the stand-alone competitiveness of each business, expanding our customer base and business footprint and further expanding our data, technology and product capabilities.

Looking ahead to 2028, as this business continues to scale, we currently expect non-live streaming segment to contribute close to half of the group's total revenue and operating profit. We see this as a testament to the strength of our multi-engine growth strategy and the validation of our long-term strategic approach.

AI is a critical foundational technology supporting our long-term strategy across all of our businesses. We continue to leverage AI to drive measurable product enhancements and efficiency gains across a range of scenarios, including our streamer ecosystem, content distribution, payment experience, advertising vertical models and Shopline merchant operations.

We are also applying AI to enhance our data analysis, decision-making and execution capabilities. By turning proven experience and workflow into replicable AI capabilities, we can accelerate knowledge sharing and scale best practices further improving overall operating efficiency.

In addition to our long-term business development, shareholder returns remain a persistent strategic priority. Our strong cash position and robust operating cash flow provide a solid foundation for ongoing business investment and shareholder returns. We expect to continue actively advancing our share repurchase and dividend program as the company grows over the long term. We remain committed to validating the strategic path through solid operating results, driving great market recognition of our long-term value.

Next, I will walk through our Q2 results and share our outlook for the future. In Q2, Social Entertainment revenue grew 7.4% year on year and 5.6% QoQ. Within this segment, live streaming revenue grew 7.3% year over year and 5.9% QoQ. Core live streaming paying users grew 3.9% year on year and 1.7% QoQ. On the traffic side, our global average mobile MAUs reached $277 million, up 5.5% year on year, supported by strong user engagement and organic growth.

Our instant messaging product increased its contribution towards total MAUs to 82%. BIGO Live, our flagship product, recorded stronger sequential growth in Q2. This momentum was driven by ongoing enhancements to our streamer incentive and growth mechanism, a richer content ecosystem and AI-powered improvements to content distribution and payment experiences alongside localized of reading campaigns. Together, these efforts effectively drove user engagement and greater willingness to pay.

In Q2, BIGO Live's average daily active streamers increased 4.4% QoQ, while newly signed streamers going live increased 5.4% QoQ as we further enhance our streamer Recruitment, innovation and investment mechanism the supply of high-quality content on our platform should continue to expand.

In content distribution, we continue to develop and refine our AI-driven content understanding capabilities. In particular, our focus is on improving onboarding content for users and the depending users' consumption. By identifying and distribution high-quality content across regions, we can better match content with users' interest and improve their consumption experiences.

To improve payment experience, we have been expanding our AI-generated content and interactive virtual gifts. In May, this gift accounted for 34.3% of total virtual gift consumption, further validating the value of AI enriching our content supply and enhancing users' interactive experience. At the same time, our new voice continued to drive solid growth. In Q2, revenue from these new products increased more than 400% year on year and 39% QoQ, gradually becoming a meaningful complement to our Social Entertainment growth.

Our current Q3 guidance projects moderate single-digit year-on-year growth for Social Entertainment revenue. In the second half, we will continue to strengthen localized operations, enrich content supply and further optimize user and payment experiences.

As core live streaming paying users expand steadily and our new voice product portfolio contribute to further incremental growth, we expect stronger momentum for our Social Entertainment business. Based on current trends, we are confident that our Social Entertainment business will achieve full-year revenue growth in 2026 and such a steady growth trajectory beyond.

In Q2, BIGO Ads generated $134 million in revenue, up 53.1% year on year and 7.1% QoQ. Notably, our third-party business, the BIGO Audience Network continued its strong momentum, delivering 74.1% year-on-year growth and 9.3% QoQ growth, accelerating traffic expansion, a more diversified advertiser mix, omnichannel positioning and significant algorithm efficiency gains are all strengthening the flywheel effect.

On the supply side, BIGO Ads developer ecosystem and global traffic coverage continued to expand. Our SDK traffic maintained a steady increase of 37.7% year on year in Q2. On the demand side, our strategic presence across multiple verticals, combined with AI-driven algorithm integration, growing traffic scale and regional market expansion drove strong advertiser demand. As a result, performance advertising demand across multiple channels, including web and IAA delivered standout result, Web-based demand primarily from lead generation and e-commerce grew 91.7% year on year and 14.4% QoQ.

In Q2, we continued to expand our advertiser base in several verticals such as base based in e-commerce, further enriching our advertiser mix as we approach the peak season in the second half, we are making early preparation in Q3 and remain optimistic about the growth prospects of web-based demand. Meanwhile, IAA spending recorded 70.3% year-on-year growth.

On the algorithm side, continued investments in algorithm and engineering infrastructure platform algorithm capability and cost efficiency and converting into positive circle that will drive the next stage of BIGO Ads development. As we activate our customer feedback data and refine our multichannel attribution capabilities, our user and targeting capabilities are improving.

Building on this, we continue to integrate our vertical-specific models and strengthen our platform algorithm capabilities. We are focusing on traffic and budget matching, traffic building and post campaign optimization. Together, these efforts are improving the matching efficiency between budget and traffic.

We -- and overall magnetic vision efficiency. At the same time, we are advancing upgrades to our algorithm and engineering system and continuously optimizing compute scheduling and several costs, which allow us to managing infrastructure costs more efficiently even as request when values build.

As we build our three-layer system of vertical algorithm, platform algorithm capabilities and engineering in structure, the data accumulated from a growing customer and traffic base will feed back into model optimization efforts. We expect this will drive value further across delivery performance, advertiser budget and traffic monetization efficiency and provide strong technological momentum for the next stage of scale growth in our advertising business.

Looking ahead, we will continue to deepen our focus on key verticals such as lead generation, e-commerce and gaming. We aim to further bolster our differentiated competitive advantage by expanding customer scale and density, ensuring more regional remarks and improving our algorithm and product capabilities.

Based on our progress to date, we remain confident in our established long-term target for the third-party advertising business. We are continuing to scale. We expect a steady structure improvement in profitability as the ad tech business gradually becomes an integral driver of group's revenue and profit growth.

Turning to Shopline. In Q2, Shopline generated revenue of $34 million, up 28.6% year on year and 12.5% QoQ. With revenue growth building up from Q1, business from cross-border merchants strengthen strong growth of 73.5% year on year, driving the acceleration in offshore revenue. Last quarter, we reported Shopline as a stand-alone segment for the first time and defined it as AI [dictate] one omnichannel commerce infrastructure, which we offer merchant is not simple a build to but a full open, connectable and extensible omnichannel retail operating system.

I would like to take this opportunity to share how AI is bringing new changes to the e-commerce industry and to Shopline. AI is fundamentally reshaping and the way consumers discover products, compare options and complete purchase new traffic and transaction entry points emerge, commercial scenarios were becoming more diverse and fragmented. Against this backdrop, merchants need a unified, open and connectable e-commerce infrastructure more than ever on that linked product, transaction and customer relationships across different channels.

As commercial entry point diverge and diversify merchant demand for the unified operating system growth, making Shopline's value as an omnichannel commerce infrastructure even more pronounced. In the first half, for Shopline, merchant page views from AI channels grew nearly 15-fold year over year and order volumes grew over 35-fold year over year. It's gradually becoming a common e-commerce scenario for customers, consumers to discover products through AI entry point and complete transactions directly in merchant stores.

Shopline has expanded its integrations with multiple leading AI agents, including ChatGPT, Cloud and Cursor. This enables merchants to capture the traffic and transaction from the new entry points while converting orders, customer relationships and operating data across channels into lasting asset for merchants, drawing on more complete operational data accumulated on Shopline, AI can better process and interpret a merchant's actual operating conditions and use that understanding to improve operations and decision-making efficiency.

In addition, Shopline's Copilot, which allows merchants to manage their online terms more efficiently using natural language has entered internal testing. Our goal is not only to leverage AI to unlock new traffic entry points for merchants, but also to gradually integrate AI across the entire merchant operating journey, helping merchants connect with consumers, manage operations and drive growth more efficiency in an increasingly fragmented business environment.

Our revenue is powered by two engines. On one hand, high retention subscription services provide a stable revenue foundation. On the other value-added services such as payments and marketing allow us to participate more deeply in merchant's GMV growth. As merchants reach consumers through more channels, driving continued growth in order volumes and GMV, Shopline's revenue will expand accordingly.

In Q2, value-added services maintained rapid growth and continued to increase their share of revenue. Because value-added services like payments technically carry lower gross margin and subscription services, this revenue mix shift to the modest sequential pullback in gross margin from Q1. What matters more to us is that value-added services can still on our exciting merchant base on platform capabilities without a proportion of increase in scale and R&D investment.

As a result, their ongoing growth is expected to deliver stronger operating leverage, delivering driving steady improvement in Shopline's operating profit and margin. As merchant base and GMV continue to increase, we expect value-added services to make a great contribution to Shopline revenue and profit expansion in the future, further align our long-term growth with merchant [set aside].

Our current Q3 guidance implies top-line revenue growth rate in the middle 20s year on year as revenue and gross profit continue to increase and operating efficiency growth improves. Shopline remains firmly on track along its established path in profitability.

Moving on to the share buybacks. In Q2, we repurchased a total of 108 million in shares through August 21 of this year. We have repurchased a cumulative total of $216 million, maintaining an accelerated buyback pace. Given our strong operating momentum and the long-term prospects, we believe our current share price does not yet fully reflect the company's intrinsic value.

Going forward, we will continue to actively advance our share buyback program while balancing business investment and long-term investment as our Social Entertainment and advertising businesses grow in scale and profit contribution. We will continue to work with our Board to further refine our shareholders' return framework, allowing shareholders to more fully benefit from the company's operating results.

In closing, our Q2 results validate our multi-engine growth strategy. The value of our strategic positioning and ecosystem is only beginning to unlock. Looking ahead, as each of our three business segments become stronger and more competitive, we expect greater synergies across the group, driving our long-term value creation to its next phase.

With that, I will now hand the call over to Alex Liu, our Vice President in Finance, to walk through our financial results in detail.

(interpreted) Thanks, Misty. Hello, everyone. In the second quarter of 2026, we recorded total net revenues of $591 million, securing a year-over-year growth of 16.3% and quarter-over-quarter growth of 6.3%. Our non-GAAP EBITDA for the quarter was $57 million up 18.1% year over year and 24.4% quarter on quarter. Our operating cash flow was $65 million, and we ended the quarter with roughly $3.06 billion in net cash.

As previously communicated, we accelerated our share buybacks since the start of 2026. As of August 21, we have bought back $128 million worth of our shares and the up to $600 million share repurchase program authorized in May, bringing total share repurchase to $216 million year to date.

I will now dive deeper into our detailed financial performance. Social Entertainment revenues were $423 million for the second quarter, up 7.4% year over year and 5.6% quarter over quarter. In particular, live streaming revenue growth accelerated to 7.3% year over year and 5.9% quarter over quarter, further confirming the recovery momentum of our cloud business.

Core live streaming paying users increased by 3.9% year over year, while ARPU returned to positive growth, up 2.4% year over year. Live streaming revenues from developed countries continued to deliver strong growth, increasing by 11.8% year over year.

BIGO Ads revenues increased by 53.1% year over year and 7.1% quarter over quarter to $134 million. In particular, our third-party advertising business, BIGO Audience Network delivered another exceptional results, recording 74.1% year over year and 9.3% sequential growth. On the traffic front, SDK network and ad request increased by 37.7% year over year in the second quarter. We continue to optimize our to improve ad campaign performance and drive advertiser spending.

Our multi-vertical strategy also helped us capture broader market opportunities. Web-based demand increased by 91.7% year over year while mobile-based demand remained strong with IAA spending up 70.6% year over year. We remain firmly committed to our three-year strategic goal for BIGO Audience Network of $1 billion in revenue. As the business continues to scale, we are confident in its ongoing profitability with room to further improve its economics over the medium term.

Shopline generated revenue of $34 million with growth accelerating to 28.6% year over year and 12.5% quarter over quarter. Revenue from cross-border merchants increased by 33.5% year over year, while its revenue contribution rose by 7.2 percentage points compared with Q2 last year, making it an increasingly important driver of Shopline's overall growth.

Gross profit was $202 million in the quarter, up 8.8% year over year and 6.5% quarter on quarter with gross margin remaining sequentially flat at 34.1%. Social Entertainment gross margin was up quarter over quarter as we continued to improve user engagement and monetization. BIGO Ads gross margin was down quarter over quarter due to a shift in revenue mix, reflecting a higher contribution from lower-margin third-party advertising revenues.

Shopline's gross margin was also down quarter over quarter, primarily driven by a higher contribution from lower-margin value-added service, particularly payments and marketing. While the service carry lower gross margin than subscription revenues, they typically require less incremental sales and R&D investment to scale. We therefore believe this mix shift will benefit Shopline's operating leverage and long-term profitability.

Our operating expenses for the quarter were $188 million, up 4.7% year over year and 2.6% quarter over quarter. Sales and marketing expenses were higher year over year, consistent with the revenue increase. G&A expenses were also higher year over year, primarily due to increased share-based compensation expenses.

R&D expenses were lower year over year as we remain prudent and disciplined in our total spending through enhanced resource sharing and operational synergy across different business units while strategically allocating incremental shares of our R&D resources towards BIGO Ads.

Our non-GAAP operating income for the quarter was $49 million, up 28.2% year over year and 29.4% quarter over quarter. Non-GAAP net income attributable to controlling interest of JOYY in the quarter was $63 million, representing a non-GAAP net margin of 10.7%. Our non-GAAP net income was lower year over year due to a higher FX loss of $14 million as the US dollar weakened. Excluding the impact of FX losses, our non-GAAP net income would have been $77 million, broadly in line with the prior year.

For the second quarter of 2026, we booked net cash inflows from operating activities of $65 million. Our balance sheet remains healthy with a strong net cash position of $3.06 billion as of June 30, 2026.

Now moving to capital allocation. Shareholder returns continued to be an important component of our capital allocation strategy. As of August 21, 2026, we have returned $359 million to our shareholders through dividends and share repurchase this year, already exceeding the total amount returned to shareholders for the full year of 2025. We believe we remain substantially undervalued and we will continue to actively execute our share repurchase program.

Turning now to our business outlook. Driven by continued growth momentum across our Social Entertainment, BIGO Ads and Shopline business, we expect our total net revenues for the third quarter of 2026 to be between $602 million and $622 million, implying year-over-year revenue growth of 11.4% to 15.2%. For the full year of 2026, we remain confident in delivering solid revenue growth across the group.

On the profitability front, backed by a better-than-expected operational performance in the first half of the year and enhanced operating leverage from improved efficiency across our business segments, we now expect the group's full-year 2026 non-GAAP operating income to grow around 20% year over year, up from our previous expectations of teens level growth.

To summarize, we delivered a strong set of results in the second quarter with all three business segments delivering encouraging growth and operating profitability continue to improve. Looking ahead, we remain confident in our growth outlook and will stay focused on improving operating efficiency, sustaining profitability growth and creating long-term value for our shareholders.

That concludes our prepared remarks. Operator, we would now like to open up the call to questions.

(Operator Instructions) Xueqing Zhang, CICC.

(spoken in foreign language)

(interpreted) Congratulations on the strong quarter. My question about live streaming business. We see live streaming revenue returned to both year-on-year and quarter-on-quarter growth in the second quarter. Could management elaborate on the sustainability of this recovery and share your view on the longer-term outlook for the live streaming business?

(spoken in foreign language)

(interpreted) In the second quarter, our live streaming business grew 5.9% sequentially with year-on-year growth further accelerating to 7.3% driven by growth in both paying users and ARPU.

On the operations side, in Q2, we continue to optimize across multiple areas, including streamer incentive mechanism, content ecosystem development and AI-driven improvements across content distribution, user content consumption and payment experience. This AI-driven enhancements to the user experience further drove sustained improvements in paying conversion rates. Therefore, our core live streaming paying users grew 3.9% year over year.

From a regional perspective, this recovery continued to be driven by revenue growth in developed markets. The Middle East market also delivered solid sequential growth, driven by our new voice product portfolio.

Our current third-quarter guidance projects moderate single-digit year-over-year growth for Social Entertainment revenue. As core live streaming paying users continue to grow steadily and the new voice product portfolio contributes further incremental gains, we expect the growth momentum of our Social Entertainment business to continue strengthening. Based on current trends, we are confident that our Social Entertainment business will achieve full-year revenue growth in 2026, while maintaining steady business momentum.

Daniel Chen, JPMorgan.

(spoken in foreign language)

(interpreted) So I will translate myself. So we actually see that the second quarter advertising revenue -- the advertising business is growing very strong. So how should we look at the outlook for the third-party advertising in the second half of this year in terms of the growth rate and also the margin profile?

(spoken in foreign language)

(interpreted) Thank you, Daniel, for your question. I will take your questions. In the second quarter, our third-party advertising business sustained its strong growth momentum with revenue increasing 74.1% year over year and 9.3% quarter over quarter, exceeding our previous expectations. Growth in traffic and advertiser budgets, together with continued improvements in our advertising algorithms, further strengthened our business flywheel.

On the traffic side, we continue to deepen our partnerships with Mediation platforms such as MAX and LevelPlay, further expanding our global reach while maintaining steady growth in SDK traffic. On the demand side, our strategic presence across multi-verticals continue to drive strong advertiser demand, leveraging our established capabilities across lead generation, web e-commerce and in-app advertising.

Our second-quarter web-based demand grew 91.7% year over year, while IAA spending grew 70.6% year over year. At the same time, we continue to expand our advertiser base in sub-verticals across lead generation and other key verticals, further enriching our advertiser mix.

On the platform side, as traffic and budgets expand rapidly, we are continuously iterating on our algorithms and data capabilities, driving more vertical-specific optimizations and enhancing our bidding and delivery strategies. At the same time, we are advancing AI-driven upgrades to our algorithm and engineering systems, optimizing compute scheduling to manage infrastructure costs efficiently, even as request volumes grow rapidly. Based on current business trends, we are highly confident that our third-party advertising business will continue to deliver strong growth.

Turning to profitability. Our third-party advertising business is during a rapid expansion phase, requiring continued investment in research and development, sales capabilities and infrastructure this year. That said, this business has healthy unit economics, giving us confidence that we can remain profitable while steadily improve margins over the medium term as we scale.

Thomas Chong, Jefferies.

(spoken in foreign language)

(interpreted) Congratulations on a very strong set of results. My question is about the full-year outlook. Can management comment about the 2026 revenue and profit guidance across different business segments?

(spoken in foreign language)

(interpreted) Thank you for your questions. Looking ahead to the third quarter of 2026, our current guidance implies 11.4% to 15.2% year-over-year growth for our total revenue.

By business segment, for Social Entertainment, we expect the third quarter revenue to deliver moderate single-digit year-over-year growth. BIGO Ads will continue to deliver strong double-digit year-over-year growth in Q3. For Shopline, we expect it to remain more than 25% year-over-year growth.

For the full-year 2026, we expect Social Entertainment to deliver steady year-over-year growth. For BIGO Ads, with continued traffic expansion, deepening multiple vertical advertiser base and ongoing algorithm optimization, we expect strong mid-double-digit year-over-year growth for the full year.

For Shopline, supported by maturing product capabilities, accelerating cross-border merchant penetration and new market expansion, we expect its year-over-year growth to further accelerate, exceeding 20% year-over-year growth for the full-year 2026. With all these three segments on an upward trajectory, we are confident in the solid revenue growth for 2026.

Regarding operating profit, looking at the third quarter, we expect our non-GAAP operating profit to continue its year-over-year growth trend, while operating expenses are expected to rise slightly quarter over quarter due to the seasonality of certain cost items. For the full-year 2026, regarding Social Entertainment, as live streaming returns to steady growth, overall live streaming operating profit will maintain modest year-over-year growth.

As we mentioned earlier, with continued SKU expansion, BIGO Ads midterm profitability is also expected to steadily enhance. For Shopline, with relatively fixed operating expenses, the growth of revenue and gross profit will continue to drive narrowing of its operating losses.

In summary, based on the better-than-expected overall operating performance in the first half of the year as well as the operating leverage brought about by improved operating efficiency across businesses, we expect our full-year non-GAAP operating profit to achieve around 20% year-over-year growth in 2026.

We guided up our guidance. On net profit, I would like to add on a little bit regarding the foreign exchange loss items. Due to the continued weakening of the US dollar, we recorded significant unrealized foreign exchange losses in the first half, and we expect a similar trend in the third quarter. However, these are non-operational mark-to-market fluctuations and are unrelated to our underlying operating performance. Conversely, a strengthening US dollar would also result in unrealized foreign exchange gains.

Brian Gong, Citi.

(spoken in foreign language)

(interpreted) have a question on Shopline. We target to achieve profit breakeven for Shopline in 2028 management give us an update on the latest development and the growth drivers for Shopline? And what would be the profit breakeven road map for the business?

(spoken in foreign language)

(interpreted) Thank you, Brian, for your question. As we discussed earlier, AI is creating new growth opportunities for both the e-commerce industry and Shopline. As the new traffic and transaction entry points continue to emerge, e-commerce landscape is becoming increasingly diverse and fragmented, driving stronger demand for a unified operating system from merchants. This trend will further underscore Shopline's value as an omnichannel commerce infrastructure. We remain firmly confident in the long-term prospects of this market.

Our business model is closely aligned with the success of the merchants. Subscription fees provide us with a stable and recurring revenue base, while value-added services such as payments and marketing services enable us to participate more directly in the growth of the merchant transactions and GMV. As merchants expand across more channels and scale their businesses on Shopline, they tend to adopt more of our services, making the platform increasingly valuable to them. As a result, our growth is driven not only by new merchant acquisition, but also by the continued growth of existing merchants and the increasing penetration of our services.

We have already seen this dynamic play out in our cross-border business. In the second quarter, revenue from cross-border merchants, mainly led by brand customers, grew 73.5% year over year, helping drive a further acceleration in Shopline's overall revenue growth.

On the road map to breakeven, our R&D expense, which has been our primary OpEx for Shopline, has largely stabilized. Continued growth in revenue and gross profit is driving operating leverage, resulting in significant narrowing of Shopline's losses. With gross profit continuing to grow and operating expenses remaining relatively stable, we are confident that Shopline will further narrow its losses in 2026 and reach operating breakeven by 2028.

Sardonna Song, UBS.

(spoken in foreign language)

I'll translate myself. My question is on shareholder return. The company has a three-year USD1.5 billion shareholder return program with ample net cash at present. I observed that management has accelerated buyback in 2Q and quarter-to-date. What will be the pace of future buybacks ahead? And how does the group balance growth-oriented investments versus cash return to shareholders?

(spoken in foreign language)

(interpreted) Thank you, Sardonna, for the question. As I just mentioned, since the beginning of the year to August 21, we have already bought back USD216 million of our shares in total. Even under the new share buyback program authorized this May, as of August 21, we have bought back $128 million of our shares. There is no inherent trade-off between investing for growth and returning capital to shareholders. We are backed by a strong net cash balance and robust cash-generating capabilities.

Firstly, we held a net cash position of $3.06 billion on our balance sheet at the end of the second quarter. Secondly, all the three of our business segments have embarked on well-defined growth trajectory, which will drive continuous improvement in underlying business fundamentals and cash flow contribution. Therefore, our shareholder return framework is built on an exceptionally solid and resilient foundation.

We believe that the current share price still does not fully reflect the long-term growth potential of our three businesses, and our active share buybacks demonstrates the confidence from the senior management team in the company's longer-term value and prospects.

Going forward, we will continue to actively return capital to shareholders. As our operating profit continues to grow, we believe shareholders can look forward to greater returns in the long run. Thank you.

There are no further questions at this time. I'll now hand back to the company for closing remarks.

Thank you. Yes, thank you for all of the questions. So we may conclude the call today. Yeah, if you have any further questions, please feel free to reach out to the IR team. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.